We wrote last year about the perspectives for the Spanish Property Market in 2015 (And for once in life it seemed we got it just about spot on) and thought it was time to look back at what we said last year and what 2016 is looking like too.
So, we suggested that prices would continue to fall in certain areas, would stablize or continue stable in others and would rise where there was a lack of supply. All correct. We also said there would be no real change until Spain deals with its chronic unemployment problems (Which it hasn’t done of course) that there would be political instability due to the elections, which there has been and continues to be, and that you could invest wisely as long as you understand the segmentation in the market and look at undervalued assets in areas that are in demand. Again all correct.
Therefore it must be time to put our heads over the parapet again and make some more predictions for 2016. What will happen in the Spanish property market in 2016 and where will that lead us? (And we reserve the right to be spectacularly wrong of course :-))
There is a lot of political uncertainty at the moment mostly around the demand for Catalan independence and the results of the national elections in December meaning that no political party or parties are actually able to form a new government. Therefore we have a party in government without a mandate or the ability to pass legislation with a threat to territorial integrity from the splitting off of Catalunya into a separate country.
Hmmmm, how will this affect the day to day workings of the property market?
Short answer is it won’t at all. Despite all of the Machiavellian manoeuvres in the background by all of the political parties and the dire consequences predicted by those for and against Catalan independence it makes no difference to the property market as a whole. If or when Catalunya gains independence from Spain an accommodation will be made with the EU for Catalunya to continue using the Euro and become an active part of the Union due to its economic and strategic importance within Spain and Europe. There is a long answer as well but that is beyond the scope of this short article.
There are about six sets of official figures for the state of the property market as a whole and in regions, areas and towns. None of the figures are correct because of a few factors: Some are based on asking prices on portals, some are based on prices stated on deeds in the notaries and some are supplied by the government.
All have faults.
Examples include the fact that the prices paid in notaries should be the most reliable to give long term trends but they don’t include “Black Money” paid over, which is still happening but not as much as in the past. This means that if there is less Black Money about prices seem to have risen even if the actual price paid remains the same or even when there are drops.
Also, prices may seem to be rising when at the bottoming out of a market because the absolute bargains become more scarce. Let’s take an example. If there are ten properties for sale at 100k that are similar but one person is desperate to sell and accepts an offer of 50k then the average price drops to 95K. If in the following year there are not as many desperate sellers around as interest rates are low and the increase in unemployment has stopped for example then those same ten properties at 100K have an average price of 100k. Therefore it looks as if prices have risen almost 6% from 95k to 100k. That is not the case, prices are not rising but they look as if they are rising in the official figures.
What do the “official” figures say?
Last year in Spain prices either rose by 2.2% on average or dropped by 6.1% on average depending on what “official” figures you choose to paint the most accurate picture. (There may be other official figures we have missed but these are the upper and lower limits to what we have seen)
Anecdotally, on the ground here in Spain, we can tell you what is happening is more akin to the scenario we have just described. Prices are flat but the average is going up due to the lack of ridiculously underpriced properties. They still exist but are fewer and further between compared with the last two years.
One thing to remember is that the “normal” prices being paid are great bargains compared with the top of the market in 2006-2008 with the average price being down between 40-55% since that time depending on the area and the official figures you choose to believe. As I explained in a post at the start of 2015 some prices have dropped by more when you take into consideration the fluctuations in the currency markets obviously depending where you are coming from when you buy (That house was one of those amazing bargains that come up).
And to conclude here is a copy and paste from the article last year in the part about where prices will go up.
Prices will rise. There are hotspots around, places which are so popular and quality properties in those areas are in short supply. The usual economic doctrine of supply and demand work in the Spanish Property Market just as they do anywhere else. When supply is short and demand rises then prices will rise too. Remember that although there are potentially over a million properties on sale in Spain the vast majority are not really high quality or brilliantly located. That number is limited and getting lower as they are cherry picked by buyers. Therefore there is no real infinite supply despite what the base figures of number of properties for sale may suggest….
And also in copy and paste is the conclusion with a few additions in bold type…
“So the conclusion is not clear, there is no 100% certain answer for what will happen in 2015 in the Spanish Property Market but I would suggest more of the same. I cannot tell you that prices will rise by x% or that prices will crash again or anything in between although I doubt either of those scenarios will happen. What I can tell you is that there are some great deals around (although finding them requires a great knowledge of the market) and if you want one of them then you may be well advised to contact us at the SPM and tell us exactly what you are looking for. There might well be a great deal around for you at the moment. You never know until you take a look.”.
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